B-400312.2, Advanced Scientific Applications, Inc., February 5, 2009

Adele
Ross Vine, Esq., General Services Administration, for the agency.

Paul
N. Wengert, Esq., and Ralph O. White, Esq., Office of the General Counsel, GAO,
participated in the preparation of the decision.

DIGEST

Protest that
the solicitation for Federal Supply Schedule (FSS) contract is defective
because it includes a standard contract cancellation clause set forth in General
Services Administration (GSA) Federal Acquisition Regulation Supplement sect. 552.238-73,
is denied where the protester has not shown that the clause exceeds the
authority of the GSA in establishing FSS contracts, or otherwise conflicts with
statute or regulation.

DECISION

Advanced
Scientific Applications, Inc. (ASA), of Fullerton, California, a small
business, protests the terms of request for proposals (RFP) No. FCIS-JB-980001-B,
Refresh 21, by the General Services Administration (GSA). ASA argues that the RFP is defective because
it includes a cancellation clause that, in the protester's view, improperly
allows either party to cancel the contract on 30 days notice for no reason.

We deny the protest.

BACKGROUND

The RFP being challenged is "Refresh
21" of the solicitation for Schedule 70 of the Federal Supply Schedule (FSS),
which is the general purpose information technology schedule.[1] GSA issued the "Refresh 21" RFP, the terms of
which are at issue here, on June 13, 2007.
ASA is seeking a Schedule 70 contract, so that it can provide electronic
reverse auction services to federal agencies under the FSS program.[2]

Three provisions of the
solicitation are relevant to this protest.
First, the RFP includes a tailored version of the clause at Federal
Acquisition Regulation (FAR) sect. 52.212-4, which the RFP stated was tailored
pursuant to a FAR deviation. Since FSS
contracts are indefinite-delivery/indefinite-quantity (ID/IQ) contracts under
which orders may be placed by numerous federal agencies, the modification to
FAR sect. 52.212-4 explicitly states the authority of an ordering agency to
terminate an order for the convenience of the government. Specifically, where the standard clause
provides that the "contract" may be terminated for the convenience of the
government by the contracting agency, the modified clause substitutes the words
"order" and "ordering activity." RFP
at 22‑23.

Second, the RFP also contains the
clause that is at the center of this protest; this clause provides both the GSA
and the contractor with the authority to cancel the base FSS contract itself. RFP at 47.
The cancellation clause provides as follows:

C.35
CANCELLATION (GSAR 552.238-73) (SEP 1999)

Either party may cancel this contract in whole or in
part by providing written notice. The
cancellation will take effect 30 calendar days after the other party receives
the notice of cancellation. If the
Contractor elects to cancel this contract, the Government will not reimburse
the minimum guarantee.

General Services Acquisition
Regulation[3]
(GSAR) sect. 552.238-73; see also GSAR sect. 538.273(a)(4) (requiring the
cancellation clause to be incorporated in all FSS solicitations and contracts).[4]

Third, the RFP includes a clause
providing the minimum guaranteed quantity, and explaining its application in
case of a cancellation, in relevant part, as follows:

C.5 GUARANTEED MINIMUM (I-FAS-106) (JUL 2003)

The minimum that the Government agrees to order during
the period of this contract is $2,500.
If the Contractor receives total orders for less than $2,500 during the
term of the contract, the Government will pay the difference between the amount
ordered and $2,500. . . .

The guaranteed minimum applies only if the contract
expires or contract cancellation is initiated by the Government. The guaranteed minimum does not apply if the
contract is terminated for cause or if the contract is canceled at the request
of the Contractor.

In the course of negotiating a
contract with the GSA, ASA requested that the agency remove the cancellation
clause. GSA denied that request, and
this protest followed.

DISCUSSION

ASA argues that GSAR
sect. 552.237-73 violates FAR sections 8.4, 12.403, 49.000 and 52.212‑4 as
well as the spirit of the FAR. Protest
at 13. ASA argues that the clause is
unfair because it allegedly expands GSA's rights beyond a standard termination
for convenience clause. Protester's
Comments at 11. ASA also maintains that
the clause eliminates a contractor's ability to seek damages for breach of
contract if the agency cancels a schedule contract without cause. Id.; E‑mail from Protester to
GAO, Jan. 6, 2009, at 1.

GSA responds that the
cancellation clause does not conflict with the FAR, and its use is required by
the GSA Acquisition Manual. Legal
Memorandum at 3-4; Contracting Officer's Statement at 3.[5]

Although the protester argues
that the cancellation clause directly conflicts with particular FAR clauses, we
see no basis to sustain this protest. An
agency head, or his designee, has the authority to approve deviations from
particular requirements of the FAR, including exempting the agency from a
particular provision. FAR sect. 1.404; See,
e.g., Telos Field Eng'g, B‑257747, Nov. 3, 1994, 94-2 CPD para.
172 at 3-4 (agency properly deviated from FAR requirement to publicize solicitation
requirement, even though it also failed to obtain full and open competition
required by statute). As required, the
cancellation clause here was promulgated by GSA through the notice and comment rulemaking
process. Although agency FAR Supplements
generally may not conflict or be inconsistent with FAR content, FAR
sect. 1.304(b)(2), we disagree with the protester's claim that the
cancellation clause conflicts with any of the specified provisions of the FAR.

To the extent that the protester
is arguing that the cancellation clause deprives it of rights to which it is
entitled, the question of whether the GSA may cancel a contract for no reason,
or for a bad faith reason, under the cancellation clause must ultimately be
decided by other forums on specific facts.
See, e.g., Commercial Drapery Contractors, Inc. v.
United States, 967 F. Supp. 1, 4 (D.D.C. 1997), aff'd, 133 F.3d
1, 6 (D.C.Cir. 1998) (reviewing and rejecting claim that cancellation of FSS
contracts was improper, and finding no support for claim that GSA cancellation
clause was an allegedly invalid FAR deviation).
Our Office does not have jurisdiction over matters of contract
administration. 4 C.F.R.
sect. 21.5(a) (2008).

On the other hand, while
challenges to the legal sufficiency of a solicitation are not often raised in
this forum, we have considered, and will consider, a protester's timely claim that
a solicitation anticipates award of a contractual instrument that is legally
insufficient in some way. For example, we
will sustain a protest against the terms of a cancellation clause where it
purports to deny a contractor under an indefinite quantity contract the benefit
of the minimum guarantee. Southwest
Lab. of Okla., Inc., B-251778, May 5, 1993, 93-1 CPD para. 368 at 4
(protest sustained where cancellation clause converted agency failure to meet
the minimum guarantee into a termination for convenience to avoid liability for
the minimum guarantee).

Here, however, the solicitation
specifically recognizes the government's obligation to honor the minimum
guarantee in the event of a cancellation by the government. The protester has shown no other basis to
question the GSA's use of the cancellation clause in this RFP issued under the
FSS program.

The protest is denied.

Gary L. Kepplinger
General Counsel

[1] As
is typical for solicitations for FSS contracts, the RFP for Schedule 70 is
perpetually open (or "standing"), although from time to time the GSA issues an
updated edition (known as a "refresh") that, among other things, ensures that
the RFP incorporates changes to law and regulation that have occurred since the
previous "refresh" was issued.

[3]
GSAR is the GSA supplement to the FAR, and is found at 48 C.F.R. Part 501. See 48 C.F.R. sect. 501.101
(2008).

[4] We
note for the record that the GSA, as a part of the process of updating and
reorganizing GSAR Part 538, has proposed to "redistribute" GSAR sect. 538.273
to GSAR sect. 538.1203(c)(49).
74 Fed. Reg. 4596, 4603, 4606, 4628 (daily ed. Jan. 25, 2009).

[5] In
some sense, it appears that the cancellation clause is intended to restore to
GSA some ability to terminate the base FSS contract, which is, at least, no
longer explicit under the modified version of the termination for convenience
clause at FAR sect. 52.212-4, described above.